The Payment Systems Regulator’s (PSR) new mandatory APP reimbursement scheme is now live.

The new rules require all UK banks, building societies, payments and e-money firms to reimburse victims of APP fraud up to £85,000.

The regulator says that the vast majority of consumers can expect to be reimbursed within five business days of making a claim, with the scheme seeing more than 99 per cent of claims by volume covered.

Firms can choose to apply an optional excess of up to £100 for claims but this cannot be applied to vulnerable consumers.

The new protections apply to payments made on or after 7 October 2024.

The PSR expects that the new reimbursement rules will push banks and payment service providers (PSPs) to “innovate” and develop “data-driven interventions” to change customer behaviour, which could include introducing a risk-based approach to payments.

The rules come into force as the government proposes new legislation that would give UK banks power to delay payments by up to 72 hours when there are reasonable grounds to suspect a payment is fraudulent, giving them the time they need to investigate.

Currently banks must either process or refuse a payment by the end of the next business day.

Fraud accounts for over a third of all crime in England and Wales, with an estimated £460 million lost to it last year.

“Today is a very important day in making it quicker and simpler for victims of APP scams to get back money they’ve lost to criminals, with a guaranteed minimum level of protection in place,” said David Geale, managing director, PSR. “But not only that, our new requirements will see all payment firms involved facing strong incentives to introduce more robust ways of identifying and preventing these scams from happening in the first place.”

Geale said that firms have already made headway in making changes to their operations, with the organisation expecting further new and innovative systems to be rolled out in the future.

Bernadine Reese, managing director at consulting firm Protiviti's Financial Services Industry Regulatory practice in the UK, said that the new rules have introduced "significant pressure" for PSPs.

"To ensure a seamless investigation and reimbursement process, as well as to enhance the customer experience, it is essential that PSPs engage in effective cross-industry collaboration," said Bernadine Reese, managing director at consulting firm Protiviti's Financial Services Industry Regulatory practice in the UK. "It is also crucial to understand that the rules and their implementation are not one and done – they are expected to evolve in the coming months, so staying across regulatory development is vital."

In September, the PSR confirmed it was changing the maximum reimbursement limit for victims of APP scams from £415,000 to £85,000 following industry pressure.

During the same month, HSBC joined a growing number of banks calling for technology and social media companies to take more responsibility towards compensating victims of APP fraud.

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